Derek DeLia,¹ Donald Hoover,² Joel C. Cantor¹
¹Rutgers University—Center for State Health Policy
²Rutgers University—Statistics/Institute for Health
Objective: Analyze statistical risks facing CMS and Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program (MSSP).
Methods: We calculate the probability that shared savings formulas lead to inappropriate payment, payment denial, and/or financial penalties, assuming that ACOs generate real savings in Medicare spending ranging from 0–10%. We also calculate expected payments from CMS to ACOs under these scenarios.
Results: The probability of an incorrect outcome is heavily dependent on ACO enrollment size. For example, in the MSSP two-sided model, an ACO with 5,000 enrollees that keeps spending constant faces a 0.24 probability of being inappropriately rewarded for savings and a 0.26 probability of paying an undeserved penalty for increased spending. For an ACO with 50,000 enrollees, both of these probabilities of incorrect outcomes are equal to 0.02. The probability of inappropriate payment denial declines as real ACO savings increase. Still, for ACOs with 5,000 patients, the probability of denial is at least 0.15 even when true savings are 5–7%. Depending on ACO size and the real ACO savings rate, expected ACO payments vary from $115,000 to $35.3 million.
Discussion: Our analysis indicates there may be greater statistical uncertainty in the MSSP than previously recognized. CMS and ACOs will have to consider this uncertainty in their financial, administrative, and care management planning. We also suggest analytic strategies that can be used to refine ACO payment formulas in the longer term to ensure that the MSSP (and other ACO initiatives that will be influenced by it) work as efficiently as possible.
Keywords: Medicare, Econometrics, Health Care Organizations and Systems, Health Economics, Health Policy / Politics / Law / Regulation, Incentives in Health Care, Payment Systems: FFS / Capitation / RBRVS / DRGs / Risk Adjusted Payments etc., Health Care Costs, Health Care Financing / Insurance / Premiums
doi: http://dx.doi.org/10.5600/mmrr.002.04.a04
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